Cynics take note, social networking and online game startup Xuqa has announced that their daily revenue has exceeded their operating costs and that they will take no more VC funding. They’ve raised $1.3 million from BV Capital and Skype investor Morten Lund; about half of that funding is left a year after launch.
Xuqa is currently focused on poker and hot-or-not style modeling contests but other games will be rolled out soon. Competitors play for “peanuts”, the in-game currency. Modeling contest winners get peanuts, interviews with a partner modeling agency and intros to other agencies. Those peanuts are given in exchange for activity on the site and then redeemed for privileges including the ability to see who has viewed your profile page and tools that can be used in play. Players who reach the highest status level in the game are given a $1000 cash prize.
Users play the games on the site for free and revenues are generated in some very interesting ways. Instead of paying cash for in game currency, users fill out market research surveys, browse Cost Per Action advertisements and refer other users. Other than those pages, the rest of the site is ad free. Site co-founder Ali A Moiz told me that for example, later today there will be a survey for 16 to 24 year old females from Hello Kitty. I think Hello Kitty is dumb – but do they care what I think? No.
Good poker players can “live off the land,” but most users will want to get peanuts by doing surveys and looking at offers. The company has five employees in San Francisco and fifteen off shore developers. It was founded late last year by Ali A Moiz, Prosper Nwankpa and Murtaza Hussain.
I think Xuqa is very interesting and I’m intrigued to hear the news that they are a social networking site that’s actually making money. Is driving users to take market research surveys and look at things like student credit card offers a little creepy? Yeah, I think it is, but I like revenue models based on something other than advertising or asking young people to pay small sums to furnish their “minihompies” like CyWorld does. I like Xuqa.
well written marshall, thats a pretty good analysis of what makes xuqa work. thanks for the post!
Congratulations to the guys at xuQa. Great to see other young entrepreneurs kicking ass.
-Jason L. Baptiste
woot i got the 1st comment!
Back when I was a wee wee lad I used to play an online text game called Earth2025.
http://en.wikip...iki/Earth:_2025
The game was relative simple, and besides the point, what was the star attraction was the fact that the creator of the site made it so you gain extra turns or incentives when you purposely click on advertiser’s link (this artificial inflation practice went on for years before clickfraud became topic du jore) or fill out surveys.
Great concept. Now it’s reapplied as a MySpace clone. How very lovely.
As I recall didn’t zuka, god I can barely remember their stupid name, boast they were already in the black at the August Capital soiree? At the time I was wondering how it was possible and now I know and I guess feel a little underwhelmed.
Sites like this are just basically self opt-in spam databases. People whine and complain about how they don’t want to get telemarketers at home or get calls on godforbid their cell phones but here there are whoring their email address out just to get a little attention.
Alaska – we haven’t sent out a single email to our members to date for any of these promotional offers or surveys. They come to the site everyday, about 75000 of them, to check for offers. it’s weird, but they actually WANT to do this to earn peanuts.
Murtii told me to post here, so I will. Thanks for being such good friends to me, and for creating a place where millions of people can connect. Through all the bugs, downtimes, and page problems, you guys have succeeded. Congratulations, and I look forward to more Xuqa, more moderating
, and more peanut fun. Marshall, thanks for getting the word out. And Murtii, let me know when you want to hookah 
Lauren
I think XuQa is doing a great job at bringing something extraordinary and unique to social networking and they seem to always be looking for ways to add new features and to keep the site fresh with new ideas, unlike many social networking sites I’ve seen. I think that’s a huge factor in their success. Congrats to the guys at XuQa!
XuQa is unique.. It makes you addicted…lol
I am glad to see that XuQa is doing well. I do go online and look for surveys to get extra peanuts. I think XuQa is doing well because it is different from other social networks because members can interact more easily. Also by making it a “game” XuQa has in a since actually mirrored the “real world” on a website. Members want to be the most famous, the richest and get climb their way to the top first! Great idea….obviously because they are making money!!!!
I think Im the undisclosed investor. And I must say that these guys impress me sooo much. Not only are they smart enough to build this fast and stable – with their bare brains – but they also think about the cost and make a bit of money. Something that worrries me a bit about 2.0 – most new companies be of NO REVENUE real DOT COM2.0. But not these wonderboys. And what I really LOVE on this day – 9/11 – this is a PERFECT EXAMPLE OF A REAL GLOBAL WORLD – with no borders – I dont have to show my passport all the times I pass borders with Xuqa -> Pakistani founders – found by Christian from german BV Capital – in a dorm in US – with their Nigerian CTO and Korean COO – developing the backend in Pakistan…. I love the interenet and black numbers
ALI is telling the truth. I haven’t received any offers or filled out a single survey since I’ve been on the site (I simply rock at poker). On the surface Xuqa may seem very much like Myspace, but it has surpassed it in so many ways. The level of interaction (fast-paced forums) and poker has made it way more attractive to users and in some ways even addictive. And I must say, it certainly IS quite lovely.
Is there one comment on here (besides my own) that is not from a XuQa insider? In essence, this is a social network that pays vitual money to members for filing out marketing surveys. I am dumbfounded that it has VC funding and is now profitable.
This is the first time I heard of this, whatshisname… and I’m amazed too. A rough back-of-the-envelope calculation and these guys must be making ~> $1/user/month.
What gives? Are marketing surveys the new micro-payment?
What a bizarre comment thread. On revenue, CPA ads are much more lucrative – fwiw.
How long has this site been around, I’ve never heard of it. But I agree that it is a great idea compared to the other several clones popping up now and then. So if anything, congrats for being innovative and different
If you had to imagine the perfect social network what would it be?
i visited XuQa. It attracted me. I had no intention to stay on the site for long but i must confess this site is very addicting. Poker i mean its best feature and is the most craving. I have started to spend so much time over it. Then again profiles, personel pictures, kissing and all other stuff adds more flavour to the XuQa recipe.
go XuQa!
Kudos to Xuqa. Of course, daily profitability isn’t as important as quarterly and annual profitability, but it sounds like they have a model that is working for them. I’m not a big fan of the service and it’s not something that interests me, but I’m not part of the target audience so this doesn’t matter. At the end of the day, all that matters is that they have a service that appeals to their target audience and they seem to be having success monetizing it. Whether it will ever become a business that generates massive profits (or gets acquired), or has staying power, remains to be seen, but at the very least it looks like they’ve done a good job at controlling costs and have a viable small business. Apparently they only have five employees and development is done by a team in Pakistan, so they’ve kept a lean organization that looks to be appropriately staffed given their revenues, which is a trait of any successful business. Compare this to a company like Facebook, which has 140 employees and offers its employees:
Medical, dental and vision plans with no premium for employees
401(k) plan
21 vacation days per year, plus 8 company holidays and 2 floating holidays
Complimentary catered breakfast, lunch and dinner daily
Complimentary beverages and snacks
Dry cleaning and laundry service onsite
Free downtown parking permit
Subsidized gym membership
Catered Friday Happy Hours at the office
$600/month housing subsidy if you live within one mile of the office
Standard-issue 24″ LCD monitors and your option of 15″ Apple MacBook or IBM ThinkPad
Xuqa is a good example of a company that finds itself in a bubble but has managed to execute in a conservative, level-headed manner, whereas some of these other companies (like Facebook) resemble the startups in Bubble 1.0 that overhired and spent money like it was going out of style.
Hi, i’m one of the XuQa founders. Thanks for all the comments =)
(i just couldnt help but reply)
In response to the drama 2.0 thread; AYE AYE. The first days of XuQa, we turned in our college meal plan tickets for cash which we used to buy our first servers. lol! Pictures can be found here:
http://iventste...er_archive.html
(we slept over in the computer labs and security threw us out, thinking we were homeless people)
I’m really glad we didnt go out and raise/burn millions because in hindsight that would have killed the company. We’re certainly not there yet, but I think we’re definately onto some thing very exciting and profitable.
ummm too many xuqa users posting on here…i think the link got out on a xuqa forum here. I’d love to hear more from regular techcrunch posters…
April Fools! Right? C’mon guys, get serious.
“well written marshall, thats a pretty good analysis of what makes xuqa work. thanks for the post!”
Generally Marshall Kirkpatrick’s posts are decent, but I must say this one could use a bit of work. I don’t know how to put it without being sarcastic, so here I go: “I like Xuqa.” What a conclusion.
Marshall, on terms of how well written your posts are, why is this one so below your others?
We had interviewed Ali from Xuqa at the techcrunch party. You can access the podcast here. He’s the third guy in. He talks about how they came up with this change.
Isn’t XuQa the same company that initially spammed Facebook users to seed its network? If so (and I’m pretty sure I’m right), I really hope XuQa fails.
We had interviewed Ali from Xuqa at the techcrunch party. You can access the podcast here. He’s the third guy in. He talks about Xuqa and how they evolved to its current state
.
I hear Xuqa’s next goal is to start actually paying the people who work for the company >.>
hehe some very fishy comments coming in
lol.
also read this recent article on myspace:
http://web2.com...ant_You_To_Know
i am a hug fan of xuqa and the team. they are extremely focused on the user experience with a close eye on the bottom line. in this environment, it would be very easy for them to go and raise a lot of money from venture capitalists and hire a lot of people, get a fancy office, buy aeron chairs, etc. however, they are taking an extremely prudent approach to methodically building the business and treating every dollar seriously.
i look forward to their future, as i think that they are building something truly special. the combination of the social network with the game elements is really working well for them, and it reminds me of the early days of ebay. in ebay’s early evolution there were strong community elements and each member was driven to achieve a high score in the game. in the case of ebay the game was feedback and powerseller status. for many individuals this was their social strata and the ebay leader board was a way to them to keep score.
clearly, there was also financial motivation in the ebay model (which xuqa also has with peanuts and the financial incentive to win contests for real money). i think that xuqa will be able to expand into other areas and maintain the existing momentum and move further ahead.
You can get people to do creepy thngs online.
This smells like an over-hyped company… and it’s funny….like tagworld you can see from their Alexa chart that it IS an overrhyped company:
Xuqa:
http://www.alex...rl=xuqa.com#top
Tagworld:
http://www.alex...agworld.com#top
The traffic spikes coincide with their spam campaigns.
Guys,
this is not how you build a sustainable business. You may trick some VCs and users for a while, but when the dust settles you are out of business.
Good to see that XuQa is getting the attention it deserves. Having known Ali and Murti for the better part of 6 years, I know how hard they’ve worked on this and what all they’ve given up.
Also, goes to show that true innovation on the internet is not truly about the next big feature that can be rushed out to bring in the next 10K users (face it, thats what most web 2 entrepreneurs are think about most, worryingly) but about making those features self-sustaining but trying to take the company in the black and making viable business models.
Darn! This is the direction i wanted to take gpokr.com!
Have you heard of or profiled the myfreeimplants.com social networking website yet? I heard about them over at fleshbot.com and sounds like they are giving away more free boob jobs this month. Must be making a profit somehow to fund those expensive surgeries.
Wait a second, they released their poker game two months after gpokr was released. And the medal system is a striking resemblance to gpokr profiles.
So I went in to check out their poker and there was absolutely nobody at the tables. With sucha high member count how can this be possible? Is everyone filling out surveys? Something smells fishy.
this is hilarious,
this is the company i saw some time back in google ads as dating site….never heard of it afterwards….now they are making money on peanuts!! give me a break!!
this company is proud of making people addicted to poker…what kind of web 2.0 is this? who is filling surveys, guys who posted comments here?? or outsourced developers!!
techcrunch is losing credibility day by day by bringing companies like this to the limelight (may be for ad $$$)….i saw similar story on faces a week back, next i see is faces ad on techcrunch ad panel……
Well, I don’t know about the boob jobs comment, but I do know that I’ve been to Xuqa several times over the last few weeks and have found plenty of people to play poker with.
re this previous comment, you should get over it. i look at the websites, i write about what I think is interesting, then commenters complain and some one else sells the ads. besides, i said it was creepy!
rawr owns you all
we don’t do boob jobs on xuqa.
…unless you have 10 million peanuts.
though =RAWR= has said he charges more for a boob job.
much more.
I find the meaning of my life in xuqa. First thanx to god and then to admins
)
no clue about all the gobbledygook going on here about 10k users and blitherblather but xuqa’s popular and doing well so i suppose at the end of the day that’s what matters, not how many people were around playing poker when someone logged on and then made a judgement about the entire set-up. la!
Honestly, I remain very skeptical about the claim that XuQa breaks even already, by just revenues from survey and sponsored offers. Reasons are simple, the fair market charge of a >10K persons on-line survey would be around USD 0.05/complete response. If 10% of XuQa’s users take the survey, that would be USD5,000/survey. Will there be more than ten >10K survey cilents retain XuQa every month? I doubt. With a monthly revenue less than 50K, how would it possiblly break even, since the burn rate of a 1 million user SNS is very unlikely to be less than 60K-80K/month. While I personally like XuQa as a somewhat marginal SNS product, I suppose it still needs to push harder to find more revenue streams, no single company can survive without profit in long term nor they would be able to attract more venture capital to burn. After all, youth SNS market is somewhat getting saturated, and only the few largest players will stay.
Re the post above, they do outsource development to Pakistan. You can easily run a company with half that much (VERY EASILY) there.
\
The History of XuQa
was just checking my email and was surprised to find this sitting in my spam folder:
Hello,
Somebody on XuQa.com has added you to their crush list.
Click on the link to learn more.
XuQa.com/joinit
Cheers,
The XuQa.com Team
If you do not want to get any further emails, follow this link:
XuQa.com/unsubscribe.php?go=7cb0726f
XuQa.com -
1 (413) 884-1046
feedback@XuQa.com
88 Linden St. Williamstown, MA 01267
http://www.XuQa.com
I thought “hmmm,” I’d better check this out! So I did, only to discover that to find out “who” has a “crush” on my I would have to enter all my friends’ email addresses that I “have a crush” on and hope for a match:
How do I find out who my Secret Admirer is? Well if we simply told you, he or she wouldn’t be secret anymore (hint: common friends between you & your secret admirer are listed. going to each of your common friends profiles is a good way to start investigating)
What this is is not a viable way for people to connect, but an exponential disruptive mouth-to-mouth promotional scheme. If you can get people to keep referring all of their friends, you’ll soon have enough members to compete with the Facebook! Which leads me to the following theory:
In order to get mega-membership, why not send out crushlist invitations to everyone at Cornell? After all, unless all of them enter every other cornell student’s email address, they’ll never know that no one at Cornell actually sent a crush to them.
In other words, I don’t really trust XuQa. To take this even further, I have the suspicion that they’re harvesting data from TheFaceBook.com and using it to pre-populate their databases, as evidenced by the long lists of blank names of Cornell Students who all signed up on “Wednesday, Sep 21:”
XuQa Web Site : Blocking
Early in March U.W.A staff received a number of complaints about material being posted on the XuQa web site. On examination it was found that a number of postings were personal attacks on members of U.W.A, and that even though they were posted anonymously they will have been written by other members of U.W.A.
It was clear that a number of these items were defamatory. The data network at U.W.A is connected to the Internet via the UK Universities JANET network, and continuing to allow its transmission to Aberystwyth would have constituted a breach of the JANET Acceptable Use policy the University have signed up to. As such access to XuQa was blocked on 9th March.
Shortly after this, XuQa contacted Information Services to say that they agreed there were problems with the site and that they were taking steps to rectify this. On 23rd March they supplied U.W.A with Moderator Guidelines that they were distributing, and confirmed that they had appointed a number of local moderators.
However, evidence presented by members of UWA since that time clearly shows that defamatory material remains available and that, if the site is unblocked, further highly offensive material is immediately posted. As such UWA currently contemplates no change in policy, and do not expect to be reviewing the matter again in the near future. This issue has taken considerable staff time – time which would be better spent in providing robust networking for academic purposes.
The material on this page was last reviewed on 27th March 2006
The page is maintained by Jeremy Perkins.
http://www.inf....puting/xuqa.asp
Well, I do understand that XuQa is probably doing some form of outsourcing, to some hot IT sourcing spots, therefore, my guess of 60K-80K burn rate has already included this factor. TagWorld is also having substantial development done in Russia. If a SNS is purely a US based operation, I would probably say the burn rate in >100K rage. Besides, my point is that, you can not build a great company simply by cutting down costs: XuQa does not only need to worry when to break even, but also how to become highly profitable very soon in the near future. Breaking even is simply not good enough to compete with other rivals, which are making lots of money or over just-breaking-even stage already. In this market, running damn fast isnt good enough, u gotta run FASTER than others.
It is, however, not my intent to criticize XuQa here. Many young SNS start-ups are gone already. XuQa is still alive, that alone shows it has potential. Just after all the early SNS mania, remaining smart players should learn that there is still a long way to go before their early start-ups can become mature and sustainable companies. Hope XuQa will be one of them eventually.
i cannot believe it costs that much (60-80k) per month for 1 mill members SNS. Do you have any links where I can dig into those numbers? At that rate, how can many of these secondary SNS (tagworld, tagged, etc.) stay in business after VC funding runs out.
Answer is simple, they can not stay in business after VC funding runs out. And that is actually the way it should be, natural market selection. Though Tagworld and Tagged do have enough VC funding to stay in business for a while, even at that burn rate. During which they might/might not figure out sufficient revenue streams.
About those numbers, most major investment banking research divisions do cover many tech start-ups’ fundamental studies, please request one of those if you know anyone there, they usually have pdf versions for internal distribution. Although these resarch reports tend to be conservative, but they speak with numbers and fundamental information, of course numbers can tell everything, but at least they are relatively more objective that guessing and rumors. But anyhow, these reports usually serve as information analysis other than a recommendation or conclusion, so it is up to you how to interpret these numbers. After all, many of those start-ups could be their potential clients for IPO and M&A, investment banks do need to know as much as possible who they are dealing with.